While you have the business understanding and skills to run a Managed IT Services company, you may have problems meeting your long-term goals to increase your revenue and profits each year. If you want your MSP business to grow beyond where you are now, all you need to do is to make a few changes in the way you package your services. A recurring revenue model is the key to doing this. But you must make it work for you, not bog you down with unnecessary manhours that cost you in time and money.
You’re already using a business model that provides a predictable income. The Managed Services model appeals to most of us who already use subscription-based services like Amazon Prime and Netflix. Your prospects and clients are used to paying a fixed monthly fee for these services. This is a plus for you because managed IT services are already built on recurring revenue.
But, you want to increase your recurring revenue, right? Let’s take a look at this.
What industry today is generating billions of dollars in recurring revenue? An industry that just keeps growing and increasing their profits? Here’s a hint: You probably have one of their devices with you right now. As a matter of fact, you’d never be caught without it. Now you know what businesses we’re talking about…
Mobile network companies. The big cellphone providers like Verizon, AT&T, T Mobile and Sprint are very profitable. And what billing model do they use? You guessed it… The recurring-revenue billing model.
Unfortunately, a lot of MSP companies aren’t capitalizing on this. They still use the traditional services model where they get paid per job. When business is good, they can make some money. But in recessionary times, they suffer. Take a lesson from Verizon, Sprint and others that have us all hooked on their contracts and monthly payments.
The main difference is that the recurring-revenue business model provides for long-term profitability. That is, as long as you retain your clients while adding more. You can’t be losing clients and expect to grow your business.
Excellent customer service and support is essential for this to work. As long as you are providing the services they need, at a cost that’s reasonable and competitive in your local marketplace, you should be able to do this.
The recurring-revenue business model is very straightforward. Each client generates a fixed amount of revenue each month. Depending upon how you contain costs, your profit should remain the same as well. If you replicate this process, and have experienced and skilled professionals on your team, the more clients you take on, the more your profits increase.
1. Stop selling what technology does. Sell the benefits technology will bring instead
Stop selling the ins and outs of how IT solutions work. Instead, sell the benefits they will provide your clients. Your prospects are busy. They only want to know that their computers and networks will work. But they may not know why they need things like Intrusion Prevention Detection, Next-Generation Firewalls, or a SOC.
Rather than describing the product or service, tell them how they’ll benefit from it. Will it cut their costs, increase the productivity of their staff, save them time, help them access data when they aren’t in the office, prevent losing their data?
And while you’re telling them all the great ways that they’ll profit from your IT solutions and services, act like an IT consultant. Let them know what specific products/services will work best for their unique situation–which platforms, hardware or software will help them meet their customers’ needs. Help them determine if they should use a hybrid, private or public cloud. How migrating to Microsoft Office 365 will increase collaboration, save time and headaches, and help them stay connected when workers are out of the office, etc.
By offering more than technology, and being “their expert” for what they need, you’ll set yourself up as an integral player in their business growth. In the meantime, you’re not only selling solutions and services, but you’re also adding recurring revenue to your MSP business.
2. Decide what you can and can’t do.
The realm of services you can provide in your managed service plans is extensive. As you know, they can include a range of offerings. Some like hardware updates and software migrations, helpdesk services and more will cost you in time. Others like cloud services won’t.
Take advantage of the ongoing services that don’t cost you in man hours. It’s easy money and won’t negatively affect your balance sheet.
However, some MSPs are still trying to figure out how to manage their clients’ growing demand for cloud solutions. We hate to say it, but the skills gap can be a real problem.
You can approach this in 2 ways:
3. Automation Is Your Friend & Keep Track Of Your Time.
Take advantage of the free online support tools that can help you manage, track and monitor your clients’ IT. If you have a small shop with one or only a few employees, you need these automation tools to make a profit. They help you prioritize and manage everything from customer management, service delivery, contracts, billing and more.
Remember, time is money. You must log and account for the time you and your techs spend on each of your clients. Do this with every service ticket. Some clients may keep you longer than you need to be there. Make sure they are worth your time. Managed Services brings in the recurring revenue you need to grow, but only if you contain your costs.
4. Market, Market, Market.
Your MSP business won’t grow if you don’t add new clients. You can’t do this unless you sell your Managed Services. And you can’t sell if you don’t market your services.
Determine what it is that you do best and what brings you the most profit. What differentiates your MSP business from the others you compete with. Then take the time to market these services.
First, determine what you do best and what makes you the most profit. Consider focusing on a vertical like law firms, dental offices, manufacturing companies. Whatever works for you and what industries are present in your locale
Then develop your brand. This is what will identify and differentiate you from other MSPs.
Determine the marketing messages that you want your prospects to remember. (Not “We’re the best.” Instead, something like “HIPAA Compliant IT Services & Solutions For Healthcare Businesses In Baton Rouge.” This may be your primary marketing audience (healthcare providers). You can have a secondary message for all the others as well (IT Services For Small and Midsized Businesses In Baton Rouge).
Write your marketing plan. This is how you will reach your primary and secondary audiences. You’ll need to determine what marketing materials and outlets you’ll be using like print materials that you’ll distribute at events and door to door, online marketing with your website, blogs, targeted email campaigns whitepapers, case studies and more. Don’t forget about social media marketing on LinkedIn, Facebook and other platforms. It’s always best if you use an MSP Marketing Specialist to help you with all of this. They have the expertise you need. (We like Ulistic.)
5. Choose The Right Cloud Service Provider
Your prospects and clients are jumping on the Cloud. You should too, and resell cloud services to add to your recurring revenue. This will give you the basis you need to take your MSP business to the next level.
But to do this and make a profit without spending all your time, manhours and money, you need to choose a cloud service partner that will be there when you need them. How to do this? Here are a few tips:
Recurring revenue is the way to go for MSP businesses today. By following the steps and tips above, and capitalizing on the Cloud, you can ensure your MSP business will Soar to Success!
Be sure to check out these other articles that will help your MSP business profit with recurring revenue from the Cloud.